The Man I’m Betting $5 Million On

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Tilting the Odds in the shabby world of money. 

By Bill Bonner, Chairman, Bonner & Partners:

Today, we turn our attention back to the shabby world of money… and to a big decision we’ve made about our own finances. As you may know, we just made a deal with longtime friend and star analyst Chris Mayer. [Watch Bill explain why here.]

I say “star” because over the past 10 years, Chris’s recommended portfolio has outperformed the best billionaire money managers.

We had an independent CPA examine the track record of Chris’s Capital & Crisis newsletter (which he no longer edits). Turns out, if you invested $100,000 in Chris’s advice in 2004, you would have been sitting on over $480,000 a decade later. As you can see below, against even the best investors in the world – guys like Warren Buffett, Carl Icahn, and David Einhorn – that performance is remarkable.


Our deal with Chris works as follows…

Chris will pick stocks using his own methods. We will follow.

Later this month, we’ll start investing $5 million of our family money in Chris’s recommendations.

Always in Doubt

We had mixed feelings about it. We have great faith in Chris. But we don’t like investing in stocks.

When you “invest” in a ranch in Argentina, you make no money… but at least you enjoy yourself. You meet new and interesting people. You confront new challenges. You learn things you didn’t know.

Stocks give us no such pleasure. Never once has a stock said so much as “hello,” no matter how much money we put into it.

Also, we believe this is the worst time to invest in the stock market in the last eight years – for the many reasons we’ve discussed in the Diary. For the record, we still expect U.S. stocks to perform badly in 2016… and beyond.

But the guiding principle of the Diary is doubt…

We doubt that this is a good time to buy stocks. We doubt that the feds’ managed currency system will survive. We doubt that our “Deep State” government serves us well. But we also doubt that God tells us His plan for the stock market.

Chris has made a lot of money for his readers over the last decade – through good times and bad. Our investments ­– heavy with gold, cash and real estate – did less well.

The next decade could go either way. We’ll stick with our big positions in gold, cash, and real estate. But… bowing to doubt… we’ll hedge our bets, too, with stocks.

A “Good” Business?

Some things you do for profit. Some you do for fun. Some things you do because you don’t know any better. And some you do just for the hell of it…

We’re not sure which category to put this in. If Chris does anywhere near as well as he has for the last 10 years, we will say we did it for the money. If we lose money, we’ll say we were right about stocks all along.

Like everyone else, we’ve read many books on investing. We’ve followed the debates between proponents of the Efficient Market Hypothesis (who claim you can’t make outsized returns as an investor without taking outsized risks) and their critics. We’ve studied the evidence and looked at the results. But all of this “book learning” has been overshadowed by what we have learned from running our own business.

In the stock market, you make money by finding good businesses… and sticking with them.

The problem is it’s hard to know what a good business is. Coca-Cola is a good business. It has a product that costs little to make. And people like it. Many are almost addicted to it. But there are plenty of carbonated drinks around; new ones come along every day. So it is not obvious why Coke should be a winner.

That’s why people usually can’t tell how good a business is, even when they are right in the middle of it.

In 1888, for example, Asa Candler bought the formula for Coca-Cola from its inventor, John Pemberton, and other shareholders for just $550.

And in 1961, the McDonald brothers – Richard and Maurice – sold their fast-food sandwich shops to Ray Kroc for $2.7 million.

And in 1976, the third founding partner of Apple, Ronald Wayne, sold his 10% stake in the company (today worth over $62 billion) for just $800.

If founders and owners don’t know what their businesses are worth, how can outside investors?

Buffett’s Big Bet

Most of the time, the answer is: They can’t.

Eight years ago, Warren Buffett bet $1 million that a group of hedge funds chosen by New York City-based money management firm Protege Partners would underperform the S&P 500 over the following 10 years. This bet still has two years to run. But so far, Buffett is winning by a large margin. The S&P 500 is up by about 65%… versus the roughly 22% average gain for the five hedge funds Protege Partners selected.

If the hot shots running hedge funds can’t beat the indexes, who can?

All we know for sure is that Chris Mayer has. He’s beaten the big money managers, and the S&P 500, over the last 10 years – by a wide margin. Will he do so over the next 10 years?

As the SEC reminds us, past performance is no guarantee of future performance. Still, it’s all we have to go on.

Tilting the Odds

One of the things Chris does to shift the odds in his favor: He pays attention to the people running the business.

Again, from our own experience, there are a lot of people running businesses who are more interested in their careers and their compensation than the health of the business itself. Especially, now… and thanks largely to the corruption of the entire system wrought by today’s credit-based money… managers and investors tend to be very short-term oriented.

But real growth and real profits are rarely produced quickly. Businesses are best understood as learning, not money-making, machines. The ones that succeed are the ones that learn more quickly – at low cost… by trial and error… over a long time.

Try to goose up profits in the short run and, most often, you cut off long-term learning.

That’s why companies bought and sold by professional investors, funds, or private equity firms are almost always a disaster. These predators strip out real assets, load up the company with debt, and then try to sell the husk of the company to unsuspecting investors.

That’s why Chris favors businesses where the operator has his heart in it. He will do what he has to do to help his business succeed. Again, it’s no guarantee. But it’s a small edge.

Chris (who started his career as a loan officer in a bank) also spends a long time studying company reports and adding up the numbers. Often, he finds they don’t add up at all. This doesn’t necessarily put him onto winners… but it helps him eliminate the losers.

We’ve known Chris for years. We trust him to pick stocks as much as I trust anyone. Does this mean we will make money following his advice?

We don’t know. But we’re going to find out. And you are, too… We’re making our own bet – five times as big as Warren’s. We’re betting that Chris can not only beat the S&P 500… but also that he can keep us from losing a lot of money, even if the market turns down. By Bill Bonner, Chairman, Bonner & Partners.

Bill’s decision to follow Chris Mayer’s recommendations with $5 million of his family’s money is not one he made lightly. After all… it’s a lot of money. That’s why Bill has put together a special online presentation. To learn more about why Bill decided to follow Chris’s recommendations with his family trust, and how you can follow alongside the Bonner family, watch it here now.

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  19 comments for “The Man I’m Betting $5 Million On

  1. Chip Javert
    April 20, 2016 at 7:03 pm

    Bill Bonner:

    As a retired CFO, I gotta give you credit: you write a 1200-word article explaining the corruption, difficulty and your discomfort of doing exactly what you are proposing to do by “trusting” Chris. This seems irrational; you must have a lot of extra money.

    A better bet (not necessarily a good bet) would be to buy index mutual funds.

    • April 21, 2016 at 7:56 am

      Every investor has to make their own decisions, using their own decision-making processes, their own expectations of the future, their own conditions of life (age, wealth, etc.)….

      This leads to different outcomes. For some, it’s CDs, for others it’s a “diversified portfolio.” Etc.

      For Bill, famously, it has been gold and RE of all kinds (US and foreign), and his own company.

      What I think is great about this article is the way he deals with his doubts.

      Older investors are full of doubts. Only young ones are certain they know what’s going to happen next. And doubts can get in the way – though they can also save you from the abyss.

      Bill’s famous doubts about stocks have cost him a lot of money over the years (opportunity cost, because he didn’t participate in the rally).

      So he sees that. And he makes fun of himself for it. And despite his doubts, he found a way to think about stocks, which he has lambasted for years even as they have soared.

      It’s the thinking process that counts, as he lays it out – whether or not you follow his path.

      • MarkB
        April 21, 2016 at 9:52 am

        Ultimately, we all need to make our own decision on what to invest in. I don’t believe in an all-or-nothing strategy; most of my investments are in index and passive funds, but I’m open to the idea that there are value plays out there. The problem is filtering through thousands of companies to determine which has potential.

        The approach outlined seems logical to my engineer’s mind. Its one possible strategy for finding potential investment options. Its a way of arriving a short list of possibilities that I can make a decision on.

        Will I put all my money in his choices? Absolutely not. Will I put all my money in an S&P 500 index fund? Absolutely not.

        It does seem like a logical filtering process which may identify some potential investments I’d never arrive at on my own. But I’d still do my own homework before I bought anything.

      • Chip Javert
        April 21, 2016 at 10:46 pm


        As I stated, if Bill is really that uncomfortable, I honestly think a far wiser investment is index mutual funds (and buy a copy of Benjamin Graham’s book).

        Even if this works for Bill (and here’s hoping it does), publishing this is not good advice for the thousands/millions of other insecure investors.

        I mean absolutely no disrespect to Chris (never heard of him before Bill’s post), but there are too many guys like Bernie Madoff who will take extreme advantage of insecure investors looking for a savior.

  2. g kaiser
    April 20, 2016 at 11:47 pm

    The day Bill Bonner turned!
    I can’t say whether this is sound or sick, but it goes against every grain my mind tells me should be right.
    However, if in a herd, it is not possible to choose much direction.
    I prefer to stay clear of the crowd, and follow my instinct on this one.
    I might well end poorer, who knows.

  3. ML
    April 21, 2016 at 1:19 am

    We only have his word for it. And even if he keeps it, will he tell us when he sells any of the recommendations that he has invested in? Otherwise it sounds like a clever way to attract investors to the companies that Chris recommends, which in turn would help boost the share prices!

  4. Uncle Frank
    April 21, 2016 at 7:35 am

    We have seen this before…
    As the manager of the Magellan Fund at Fidelity Investments between 1977 and 1990, Peter Lynch averaged a 29.2% annual return, consistently more than doubling the S&P 500 market index and making it the best performing mutual fund in the world.

    • Mark
      April 21, 2016 at 7:45 am

      Please tell the rest of the story 1990-2002.
      It is not so rosy.

      • Uncle Frank
        April 21, 2016 at 10:26 am

        That’s my point. Every dog has his day.

  5. Bead
    April 21, 2016 at 8:18 am

    The index fund is great for the young or immortal. Yet another one of those 60% craters is a very bad idea for me. Sure, it can’t happen, just like it couldn’t happen the last two times it happened.

    Interesting to read from yet another gored bear, though. The macro-prudentials are triumphant. Technique trumps morality.

  6. Thomas
    April 21, 2016 at 10:11 am

    All paper? What you actually own gold/silver will preserve real wealth after the next collapse.

  7. d'Cynic
    April 21, 2016 at 12:07 pm

    So what is this all about? That talent and brains do not matter: it’s all about where the wind is blowing? OK, I will write it down.

  8. Petunia
    April 21, 2016 at 12:56 pm

    Elon Musk, Tesla, Amazon, the only things worth investing in for the long term, in that order.

  9. wholy1
    April 21, 2016 at 2:21 pm

    What in the HELLo do y’all “investors” contribute to REAL PRODUCTIVITY?
    I’ll withhold the rhetorical answer in hopes of not AGAIN being censored!

    • Petunia
      April 21, 2016 at 4:24 pm

      Wall St. disconnected itself from the real economy by creating demand for shares, as opposed to, providing capital for productivity. It is only recently, in the last few years, that investors understand that the money doesn’t grow the companies anymore, it increases the price of the shares, with no underlying utility.

      The growth has been transferred to the “takers” on Wall St. in the form of fees, and lands up in the obscene bonus pools. In HFT they use the terms “makers” and “takers” to define who is providing liquidity. The reality is that they are the takers of money and we are the makers of money.

      • Toddy
        April 22, 2016 at 11:42 am

        Best concise description of Finance I’ve read in a while.


    • Chip Javert
      April 21, 2016 at 11:09 pm


      By “real productivity” I assume you mean the rather narrow (and accurate but incomplete) definition of reducing resources (labor, material, etc) to produce a widget of the same (or better) quality.

      At best, investors allocate capital (aka invest) to opportunities expected to produce an acceptable financial return. The more “productive” the investment (think Warren Buffet) the better the return (“better” has several dimensions: would you rather have a one-time-only return of $100, or a lifetime of $50 each and every year?).

      Think “capital productivity” does not matter? China is currently a stunning example of increasingly unproductive capital. So is the US Government’s recent investments in solar manufacturing (think Solyndra & crony capitalism).

  10. Spencer
    April 21, 2016 at 4:23 pm

    Just in case though BB will cover, in case he is wrong in his next article…

    …”We still have 700 head of cattle — tough, but edible. We have a couple hundred bottles of Malbec wine stocked in the depósito (store room). We have corn and tomatoes in the garden.”…

    Sounds good to me BB, and the yellow “pet pocks” we have help also.

    Near the grave for me but, sleeping with the beard outside the blankets soundly every night and praying for another day.

  11. Dave Mac
    April 23, 2016 at 4:19 pm

    I fear the next three or four years will be “challenging” for all indexes and debt-based instruments.

    Major global deflation could devastate the entire financial system.

    Good luck with your stock portfolio.

Comments are closed.